JotCast | Conrad's Utility Investor Live Chat | 2/13/2020

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Don

5:24

It seems the only dividend plays without any recent appreciation are MLP's. Thoughts on EPD, MPLX, ET, and MMP as long term plays. Any preference among XOM, RDS and CVX. Thank you for your hard work.

Roger Conrad

5:24

Thanks for you kind words.

You're absolutely right about energy as I've pointed out in this chat. Of those three super oils, I like CVX best--it's a Top 10 DRIP in CUI and has been a personal holding since the Texaco days.

BKNC

5:24

No, my name for this chat is BKNC. I was saying hi and then followed it up with another questions but when I hit return my name got sent. Ignore this. My questions was sent separately. Sorry for the confusion. There is no need to respond to this.

Roger Conrad

5:24

Sorry you had problems.

ma

5:26

Any exposure to Cronavirous?

Roger Conrad

5:26

I think I've pretty much answered this one, for both the US and Chinese stocks we hold in our model portfolios. Summarizing, what we've seen so far for both has been generally positive--because they provide essential services always in need.

Terry Printz

5:26

Your opinion of EMU?

Roger Conrad

5:26

I'm sure you don't mean Energy Metals Corp acquired by Uranium One?

Lee

5:29

How has the T-mobil merger effected your view of T and VZ?

Roger Conrad

5:29

If you look back at previous issues of CUI, you'll see that I have expected this merger to close--so no surprises, though I should point out that TMUS' primary owner Deutsche Telekom is trying to negotiate a lower price and California regulators still haven't approved, so it's not a done deal. As for VZ and T, as I answered an earlier question--this deal is bullish for them.

Terry Printz

5:31

EMO CLEARBRIDGE ENRGY MDSTRM
OPPORTUNITY FD INC ?

Roger Conrad

5:31

Got it. I don't know much about it but I would generally advise investors to be very wary of funds holding energy stocks at this time--ETFs more so than actively managed funds. That's because they hold the good, bad and ugly and are weighted toward big stocks they can get in and out of. This is stock picker's sector where quality is asserting itself and you're best off making your own choices.

Howard F

5:31

I am ahead on terp $5000 should I sell it

Roger Conrad

5:31

It's trading slightly above the point I've designated to consider taking profits. My advice as with all such companies is to take a little off the table.

Andrew

5:34

Hi Roger,

First, thank you for all you do. I've been with you since the old UF and I've profited nicely along the way. Regarding Clearway (CWEN) - if the PG&E bankruptcy wraps up and they get access to the retained money at the project level, do you think they will restore the old dividend? Or will they simply start to raise again? IF they restore, would that cause you raise your buy under price? Also, would CWEN gain access to a lump sum of cash that is freed up? Or have they been using it to pay down debt at the project level?

Roger Conrad

5:34

I do think Clearway will restore the old dividend of 33.1 cents per share, as management has previously indicated. I think they'll use the cash now trapped at the power plant level to pay off debt and grow the company. Advice is still to buy on dips to 20--at least until we have more clarity. But that's the way things look now with PG&E a deal with the governor from exiting Chapter 11 by the June 2020 deadline. Clearway earnings and guidance are due out Feb 27.

Andrew

5:37

You touched on this before, but you rarely raise your buy under price absent some meaning event that gives rise to increased expectations. I subscribe to other services (one by an old colleague of yours from your PF/UF days) that routinely raise buy under prices just because the stock has risen above their buy under. It seems you are very disciplined in raising buy under prices - even if it means we never see an entry for the stock (NEE for ex.) I appreciate that, but it means the universe of buys is small right now. If we have enough of those still below your target, should we park the money we have in cash?

Roger Conrad

5:37

I confess I don't pay any attention to what they're doing at my old publisher. But I would hope they don't just raise buy targets so they have something to recommend. In any case, there are still a dozen or so companies trading below buy targets I've set. I don't think anyone should feel pressured to invest all their money at this time and agree that its better to hold cash than take that route (VWITX being a good alternative). But 12 companies--added to what's rated buy in the coverage universe--is a lot of choices.

Guest

5:39

Roger: Just read an announcement that D purchased SO share of the proposed Atlantic Coast Pipeline. What do you feel the odds are that the pipeline will,ultimanately,win approval?

Roger Conrad

5:39

I think that deal could justifiably construed as Dominion having greater confidence the US Supreme Court will overrule the lower court on US government permits. On the other hand, the investment is pretty much a drop in the bucket for Dominion and I think they're clearly moving in another direction now. The VA legislature was supposed to be a tough place for them this year under Democrats. But instead it looks like what's passing is very pro Dominion investment in renewable energy. This is a smart company that knows how to anticipate its political environment. The stock is a bit above our buy target now but high quality.

Mkay

5:42

You used to Reccomend RCS what is your opinion now for RCS? Thank you for your insite

Roger Conrad

5:42

Two things on the Pimco Fund. They've cut their dividend twice in the last three years and the fund still trades at a 32% premium to net asset value. i think its a fund with a great track record, solid long-term management and a generous yield (8%) paid monthly. And it's one I am considering for CUI Plus. But it's no Treasury bond.

Jimmy

5:44

Yet another AGLXY question: Do you think being a pink sheet listing hurts this stock? It is very thinly traded. Often the ask is for only a few hundred shares and the next ask price is considerably more. Any special trading technique to deal with these problems when trying to accumulate a sizable position?

Roger Conrad

5:44

The main market is Australia, so the fact that the ADRs list on pink sheets shouldn't affect your ability to buy or your returns---provided you're patient. And in any case, we're really just talking about the margins here for such a cheap stock. But that said, interactivebrokers.com has a great platform for trading individual stocks around the world and the stock under the symbol AGL is one of the biggest in Australia.

Hans

5:46

Is there any interest on your part in Lithium producers

Roger Conrad

5:46

We certainly look at them. But I'm more interested from a portfolio standpoint in the larger players in this industry like BHP (NYSE: BHP). In a tough market like this one for resources, they tend to get stronger at rivals expense. And they pay a big dividend as well. The problem with individual commodities is when one gets too popular and expensive people find alternatives.

Charles

5:48

Thank you for NEP and NEE. While you discuss in your last newsletter and they appear over extended do they fall into the same category as the MAGA stocks and the Q's or S&P given that NEE is the XLU highest weighted stock by almost double over SO, so do the law of ETF flows suggest that NEP is always going to be getting more dollars than other stocks in the indices and as such it should continue to behave well (really well) in this specific environment. I haven't taken profits in years and so I am lucky until I'm not.

Roger Conrad

5:48

Good question. These stocks are now heavily indexed (NEE is part of 177) which operate under different strategies and therefore buy/sell signals. One of the things that's become very hard about forecasting returns is that many of them actually appear to be at cross purposes to each other--which makes it difficult to draw conclusions. I present a lot of data in the February CUI Feature article and would be interested in discussing your question offline.

Jane R.

5:50

Schwab says Canadian REITs like RioCan's dividends are considered "ordinary" - not "qualified" for tax purposes. Could you address this please?

Roger Conrad

5:50

It's amazing to me just how much confusion still reigns at major brokerages like Schwab when it comes to buying in Canada. Our standing advice has been to visit the websites of the companies you own and file the way they say to. That's what the IRS requires--and in fact there are plenty of instances of brokerages getting it wrong and causing problems for customers. So long as you have a documented reason for filing a certain way, you'll be able to defend your action.

Howard F

5:51

I am in aes at 12 should I be looking at taking some off the table

Roger Conrad

5:51

I'm currently advising a buy below 22. Earnings are due out Feb 28. Stock is still cheap at 14.7 times expected 2020 earnings.

Don

5:53

Roger--long time subscriber here. I have utility and telecom shares in Hong King, Canada, Australia as well as many of your US recommendations. Do you think the US dollar will remain strong? The Canadian shares are my biggest holding outside of the U.S. Thanks for your great advice over the years.

Roger Conrad

5:53

My view for a while has been that the US dollar would at the least not be a major headwind going forward from these low levels for the CAD and AUD. That's been the case the past couple years, though we haven't seen the recovery I would have expected either. Currencies like aircraft carriers take a while to turn around it's said. But I would view currency as a long-term catalysts for returns at this point rather than risk.

mkay

5:54

Would you consider over weighting energy in one's portfolio given how undervalued they are or there is still too much risk? Thank you

Roger Conrad

5:54

I think there's definitely a case for it but there is a danger for going over board, and as a consequence being less patient to wait on a recovery. I stick by the 20% limit on sector weightings.

Fred L.

5:58

Hi Roger,

A question for today’s chat. I read that BlackRock has announced a focus on ESG (Environmental, Social, Governance) concerns for their portfolios under management. If this is correct, how do you view this stance in terms of their future portfolio performance and pressures they may put on portfolio members with such a strategy? Is there any cause for concern here?

As always, a sincere thank you for all your hard work!

Roger Conrad

5:58

They're not alone. At the Edison conference in November, Fitch, S&P and Moody's all announced changes to their ratings based on a new set of ESG criteria--which will affect utilities' ratings and potentially cost of capital in the future.

I do think this will be a positive for electric utilities, however, many of which are now actually issuing green bonds to fund renewable energy and other sustainability projects. I think it's probably already reflected in share prices just as oil and gas negatives are. But for the utilities we own, every one of them has ESG slides in their decks these days--they've also realized for a while that this is how they're going to be able to hire millennials. So this is actually a positive I think.

Thank you for participating today!

Paul

5:59

What is your thoughts on kyn or other closed end funds

Roger Conrad

5:59

I cover several in the Utility Report Card coverage universe. I like KYN as a triple play on MLPs--not only does it trade at a discount to NAV and pay a high yield but its holdings are also heavily discounted to prospects.

I should disclose that I'm a board member of Miller Howard High Income Equity (NYSE: HIE) and so have become very familiar with how these things work.

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